The Wisconsin state Legislative Fiscal Bureau has bandied about the idea of an advertising services tax in order to close a projected $2.1 billion budget shortfall over the next two years.
Essentially, the state's current 5% sales tax would be extended to items that are not currently taxed, such as advertising services. The tax could raise as much as $75 billion, the bureau has estimated. One version of an ad tax could mandate that an ad agency must pay a 5% tax on all advertising placed in the state. Agencies might try to pass the tax along to newspapers, radio or other media. A media services tax also has been discussed that would tax all ads placed in newspapers, on radio and elsewhere.
Newspapers, broadcasters and ad agencies say an ad tax would adversely impact their businesses, leading to lost jobs and lower advertising revenues.
"It would be devastating," said John Labbs, president of the Wisconsin Broadcasters Association. "We're talking thousands of jobs and hundreds of millions of dollars. The advertising community and communications industry have to be concerned about it."
The No Ad Tax Coalition was formed by the Broadcasters Association, and other media in the state readily joined in. Besides including broadcast and newspapers, the coalition is backed by cable TV, printing organizations, outdoor advertising and free shoppers.
The coalition has commissioned a study by University of Minnesota professor Robert Kudrle, who will assess the impact an ad tax would have on jobs and economic activity in the state. The study will be ready in a few weeks.
The Wisconsin Newspaper Association represents newspapers in the state that are part of the coalition.
J. LeRoy Yorgason, executive director of the association, said that "if an ad tax is applied, it will cut down on the amount of advertising placed in the state, so it will cut down on the news coverage we can provide."
Bob Dye, vice president of corporate communications for Journal/Sentinel Inc., which publishes the Milwaukee Journal and Sentinel, said that "most advertisers would cut their budget in Wisconsin, or might put more advertising into other neighboring states."
Dye noted that in 1987, when Florida enacted a tax on placing ad space, it resulted in an estimated 12% drop in national advertising in the state, and the tax was repealed about six months later.
Professor Kudrle, who is creating a computer model to study the impact of an ad tax, said he hasn't reached any "definitive" conclusions yet, but he believes a tax would be "extremely damaging to businesses and enormously damaging to ad agencies in the state.
"Newspapers are heavily dependent on ad revenue, and the tax represents a real threat, especially to those newspapers on the edge. An ad tax could force them out of business."
By: Dorothy Giobbe NEWSPAPERS IN WISCONSIN have joined other media groups in a recently formed coalition, in order to launch a preemptive strike against a possible statewide advertising services tax.